Tesla just made a big move to take on Uber

Tesla CEO Elon Musk dropped a massive announcement last week: New Teslas will have hardware that will eventually enable full autonomy.

But buried in that news dump was a single sentence about Tesla's intention to take on Uber.

Last week, Musk said cars currently in production — which include the Model S, Model X, and future Model 3 — will be built with new hardware to allow them to be fully driverless, pending further software validation and regulatory approval.

You can currently order a Tesla with "Full Self-Driving Capability" online. But to do so, you have to agree to a one-sentence disclaimer: "Please note that using a self-driving Tesla for car sharing and ride hailing for friends and family is fine, but doing so for revenue purposes will only be permissible on the Tesla Network, details of which will be released next year."

Tesla did not respond to Business Insider's request for comment on the Tesla Network.

This isn't the first we've heard of Tesla's intention to develop a ride-hailing service, as Musk brought it up in his "Master Plan, Part Deux" released over the summer (emphasis ours):

"When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else en route to your destination.

"You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost ...

"In cities where demand exceeds the supply of customer-owned cars, Tesla will operate its own fleet, ensuring you can always hail a ride from us no matter where you are."

It's a plan that would directly compete with Uber, especially since Uber is also planning to use self-driving cars for its ride-hailing service.

Uber gave the public a glimpse of that plan when it launched its Pittsburgh pilot in September, which allows select users to hail an Uber that's capable of driving itself on city streets but still needs human supervision.

Where Uber and Tesla stand

Self-driving Ubers.
Business Insider/Corey Protin

Uber has an edge over Tesla in that it already has a well-established ride-hailing network. People know the Uber app, and an October report from 7Park Data showed Uber still dominates Lyft in every major US city.

But where Tesla may have its own advantage is in its name. Tesla has garnered brand loyalty akin to Apple. After all, over 115,000 people preordered Tesla's Model 3 before even seeing the car.

Many people may want to try a Tesla ride-hailing service simply because it gives them a chance to ride in a Tesla they couldn't actually own. I know I would try it just to see a Model S with Autopilot in action.

But traditional ride-hailing services aren't limited by using a specific car brand. Musk plans to address that issue by using its own fleet in cities, but it's hard to tell whether enough people would lend their cars to Tesla's fleet to meet demand in areas outside major cities.

Tesla
But when it comes to the cars' self-driving capabilities, Tesla has Uber beat.

The first generation of Tesla Autopilot currently integrated in cars allows them to auto-steer, change lanes with the tap of a signal, exit ramps when the signal is on, look for parking spots, park perpendicularly, parallel park, and be summoned remotely from a garage.

The new hardware will add to Autopilot's preexisting capabilities, allowing the cars do to things like drive themselves in heavy traffic, change lanes without input, and transition on and off freeways without the driver first putting on the signal.

Uber's self-driving Ford Fusions are lacking when it comes to highway capabilities — like merging on and off freeways — because they are designed for city streets. Also, while Tesla Autopilot can work anywhere, Uber's self-driving cars can currently operate only in select parts of Pittsburgh.

The self-driving Ubers have Tesla beat in one key area, though: They can read traffic lights and stop signs. Tesla cars won't achieve that until the Fully Self-Driving Capability is released, and it's unclear when that will be.

But at the end of the day, Uber's self-driving cars barely achieve Level 3 autonomy, and only in a specific location for now. Tesla Autopilot comfortably handles Level 2 autonomy anywhere, and the system is improving at a faster rate. Both self-driving systems require a driver to keep their hands on the wheel.

Business Insider/Corey Protin

It's likely that Tesla's self-driving system is also cheaper because it doesn't use expensive lidar sensors.

Tesla cars use eight cameras, one radar sensor, and 12 ultrasonic sensors that are seamlessly integrated into the car. The Fully Self-Driving Capability tacks $8,000 onto the base price of the vehicle.

It's difficult to see how Uber's retrofitted roof kit consisting of 20 cameras, seven lidar systems, radar sensors, and GPS would cost less than $10,000. Uber declined to say how much its self-driving hardware cost during its media day for the Pittsburgh pilot. Uber did not immediately respond to Business Insider's more recent request for comment on the cost of the roof kit.

Additionally, Tesla's ride-hailing fleet would consist of cars that have already been bought and paid for, while Uber has to build up its self-driving fleet entirely from scratch.

At the end of the day, it's still early days for comparing these services, especially since Tesla hasn't released details about Tesla Network. Uber and Tesla have yet to actually release their self-driving systems yet.

But it's clear automakers and tech giants alike will look to introduce self-driving cars in a ride-hailing setting.

That's why Uber and Tesla are far from the only players in this space. Take General Motors, for example, which invested $500 million in Lyft. GM plans to launch an electric, driverless car on the Lyft platform.

GM President Dan Ammann even said in a recent Business Insider interview that most people are unlikely to experience self-driving tech in a car they buy.

"It's very clear that the first application of autonomous vehicles is in a ride-sharing setting," Ammann said.